Despite some good news, 2012 was a bad year for the economy and for businesses. Much of that badness can be traced to state of American politics that is like a blood clot in America’s brain -- blocking a deal on the self-inflicted wound dubbed the fiscal cliff – and threatening fatal consequences if it bursts.

On the economic and business front, there are two kinds of good news. The first is the news that has been reported obsessively and the second is what the media misses. When it comes to business and economics, the public’s attention was focused on the software and hardware of social media – particularly Facebook and Apple.

With Facebook, the attention was focused on its May 2012 initial public offering. Thanks to our financial regulations, Facebook decided to go public because it had over 500 shareholders a condition which triggered its need to report to the public its financial condition on a quarterly basis. Since the law required it to report on its finances like a public company, Facebook decided to become one.

The problem with this IPO was that demand for Facebook shares was much greater than the supply. This imbalance was so pronounced – its shares initially traded at a Price/Earnings ratio of 100 – despite very little revenue, between $2 and $3, being generated by its 800 million users at the time.

Morgan Stanley, the investment bank that cut its fees to a mere $68 million for what it thought would be bragging rights to the greatest IPO of the decade, made some mistakes in the process. Among those was the role that its senior banker, Michal Grimes, played in in the selective disclosure to analysts of Facebook’s second quarter 2012 financial projections before the general public learned of it.

Morgan Stanley ended up paying a $5 million fine to Massachusetts for participating in this alleged violation of Regulation FD – intended to make sure that all investors get market moving information at the same time.

Meanwhile, Facebook’s stock peaked at $40 on the day of its IPO, plunged to $17 by September and has staged a nice recovery to $26 – still 35 percent below its peak. While this nasty outcome dimmed interest in the social network, it did nothing to dislodge CEO Mark Zuckerberg who controls 57 percent of Facebook’s voting shares – structuring it more like a newspaper dynasty than a high tech company.

The public was also obsessively focused on the maker of its iPhone. Despite a relatively small market share – Google’s Android occupies 72 percent of the market to Apple’s 14 percent -- Apple has a highly emotional and devoted fan base. And that base of fanatics cannot get enough of the latest twists and turns in the Apple story.

Thus people paid close attention to Apple’s supply chain and product introduction glitches. Thanks to the New York Times, we were all well aware of how many people died and were maimed by Apple’s supplier, Foxconn, as those workers manufactured America’s iWorld.

And it was impossible for the public to miss the many problems that Apple encountered with its Apple Maps program – it did things like direct people headed to Washington’s Dulles airport to a 747 on its runway instead of the departure terminal. All this was an effort to free Apple from the grip of Google Maps.

But the botched Apple Maps resulted in high level firings by Steve Jobs’ chosen successor, Tim Cook who was

thought to have been excellent at managing Apple’s supply chain. But now Cook has demonstrated that he cannot execute as well as had been thought. And he has yet to preside over a big new product launch – such as the iPod in MP3 players, the iPhone in smart phones, or the iPad in tablets.

Why do these stories get the most attention? For that, you need to understand the awful condition of the news business. Simply put, after spending most of 2012 working on a case study of the newspaper industry for my Babson College students, I have come to the conclusion that there is no way to make a profit in newspapers – though local TV stations can be big money machines.

That’s because more and more people are getting their news without paying a penny for it. They read stories for free on their smartphones, laptops, and tablets. And the newspaper companies try to get paid for that by selling advertising alongside the stories. Unfortunately, the rates for Internet and mobile ads are much lower than the cushy prices that newspapers used to charge for their cash cows – classified, auto, and job advertisements.

This change in the newspaper industry means that writers focus on stories that will get the most online traffic so that the newspapers can generate the highest possible revenues. My own experience – tracking the number of visitors to stories on my Forbes Start-up Economy blog – is that Facebook and Apple stories get the most visits.

And that may be partially because the general public spends so much of its life using their products and/or are owners of their shares. It may also be that journalists, many of whom are not trained in technology, lack the understanding to explain enterprise technology companies in a way that will appeal to the general public.

All this attention to these superficial stories – obscures the good economic news that was missed due to the other big story of 2012 – the presidential election. Simply put, stocks and corporate profits had a great 2012. The S&P 500 rose 11 percent on 2012 – handily beating the rate of return in a money market account of 0.4 percent or the performance of the average hedge fund – 4 percent.

And corporate profits hit a record in 2012 – the third year in a row that has happened. In the third quarter, corporate earnings were $1.75 trillion, up 18.6 percent from 2011, according to the most recent gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history – 11.1 percent – which is way above the average of 8 percent.

The 2012 election was fought by emphasizing what is now turned into self-wounding levels of hate. As America tumbles over the fiscal cliff, the forces aligned behind Mitt Romney channeled powerful contempt for President Obama into proposals to cut taxes on the top 1 percent and slash social programs for the middle class whose wages reached record lows in 2012 – now at 43.5 percent of GDP (well below the average of 50 percent).

Perhaps it is that split between the top 1 percent -- for whom record profits are not enough – and the other 99 percent of the population that drives so much attention to social media. If you focus enough on how many Facebook friends you have, you might not notice that your future prospects are less than stellar.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, teaches business strategy, and is the author of 11 books – most recently, “Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision.” His column runs Sundays and Wednesdays on telegram.com. His email address is peter@petercohan.com.

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